Dairy's Legacy Lives On in Court

The $1-billion Knudsen dairy empire has been largely dismantled, but the state's former dairy giant lives on in lawsuits filed by ex-employees and creditors.

Fourteen lawsuits have been filed against Knudsen's former bankers by dairy farmers throughout the state who together claim to be owed $28.5 million for milk delivered to Knudsen before it collapsed. In those lawsuits, nearly 1,000 dairy farmers allege that they continued to do business with Knudsen because the firm's bankers, led by Citicorp Industrial Credit Bank, falsely assured them that Knudsen was in good shape.

The investors who sold Foremost Dairies to Knudsen in June, 1985, are also suing the banks in San Francisco to recover $40 million they claim to be owed from the sale of Foremost. The old Foremost owners, including La Jolla investor Nicholas Wallner and Foremost ex-president Allan Meyer, also claim they were misled by the banks.

A spokeswoman for Citicorp in New York said the banking giant had no comment on the Knudsen lawsuits.

The former salaried employees of Knudsen have also filed a class-action lawsuit in Los Angeles to recover wages and benefits they allegedly lost in Knudsen's collapse. Their suit names 34 defendants, including ex-Knudsen executives, Knudsen's bankers and the three brothers who controlled Knudsen when it failed, Ted D. Nelson and twins Lee Roy Bangerter and Dee Roy Bangerter. The Assn. of Former Salaried Employees of Knudsen estimates that about 150 Knudsen retirees lost a portion of their benefits when Knudsen failed.